Great Bear Project Will Strengthen Future Gold Production

Key Takeaways

• Successful project completions and strategic reserve conversions position Kinross Gold for increased production, profitability, and future growth.
  
• Disciplined capital allocation and steady production levels support positive revenue outlook and enhanced return on equity.
  
• Lower production and higher cost pressures alongside execution challenges could compress net margins, affecting earnings and growth prospects amidst an uncertain regulatory landscape.

Catalysts

Engages in the acquisition, exploration, and development of gold properties principally in the United States, Brazil, Chile, Canada, and Mauritania.

• The successful completion and ramp-up of the Great Bear project, with expected annual production of 500,000 ounces at an all-in sustaining cost of approximately $800 per ounce, is a key catalyst for future growth, likely boosting revenue and operating margins.
  
• The ongoing Phase X development at Round Mountain, supported by strong exploration results, suggests a high-productivity, low-cost underground mine that can increase production and profitability, enhancing earnings.
  
• The strategic conversion of approximately 1 million ounces into reserves at Bald Mountain marks a significant step in extending mine life, potentially increasing revenue and improving net margins through continued production until 2031.
  
• Kinross plans to maintain a production level of 2 million ounces through 2027 and the remainder of the decade, indicating steady forward-looking revenue projections supported by new projects and extensions.
  
• The company's focus on disciplined capital allocation, including the potential for share buybacks in light of strong free cash flow generation, suggests increased return on equity and potential EPS growth.

Kinross Gold Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kinross Gold's revenue will grow by 1.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 18.4% today to 17.7% in 3 years time.
• Analysts expect earnings to reach $954.7 million (and earnings per share of $0.77) by about April 2028, up from $948.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.4 billion in earnings, and the most bearish expecting $472 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.6x on those 2028 earnings, up from 16.3x today. This future PE is greater than the current PE for the CA Metals and Mining industry at 13.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Kinross Gold Future Earnings Per Share Growth

Risks

• Lower production guidance for upcoming years at the Tasiast mine due to transitioning into lower grades and a planned reduction in throughput could impact overall production figures and revenue.
  
• Higher cost of sales and all-in sustaining costs projected for 2025 due to lower production levels and cost inflation could compress net margins if gold prices do not compensate for increased costs.
  
• The success of extending production and maintaining operational efficiency heavily relies on multiple ongoing projects (e.g., Phase X, Great Bear) facing permitting and execution challenges, which could delay production timelines and affect earnings growth.
  
• External factors such as potential changes in the regulatory environment or relations with stakeholders, like First Nations or government agencies, could affect project timelines and costs, impacting revenue projections.
  
• The decision to return capital to shareholders through buybacks in a high gold price environment might limit available capital for future high-return growth projects if gold prices were to decrease unexpectedly.

Valuation

• The analysts have a consensus price target of CA$18.666 for Kinross Gold based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$21.99, and the most bearish reporting a price target of just CA$9.21.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.4 billion, earnings will come to $954.7 million, and it would be trading on a PE ratio of 20.6x, assuming you use a discount rate of 7.1%.
• Given the current share price of CA$18.01, the analyst price target of CA$18.67 is 3.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.